Merger Incentives and the Natural Environment

In this chapter, we use market data to explore why businesses engage in horizontal mergers and acquisitions (M&As) with a particular focus on global M&As in the energy sector. We present a conceptual framework to examine the mechanism through which two sustainability-related variables could be correlated with merger trends and patterns. We focus on the potential role of environmental performance, as a top sustainability concern, and environmental policy, as a primary driver of sustainability progress. We illustrate the conceptual model by performing an exploratory data analysis to visualize the potential connections between (1) merger activities, (2) pollution intensities, and (3) the stringency of environmental policies. These relationships are illustrated by using country-level data obtained from the energy sector, which is one of the pollution-intensive sectors regulated for emissions.